Friday, October 29, 2004

Last week scientists unveiled the latest human gene count which lowered previous estimates further. Now, why do I mention genetic engineering in the headline of this post? It's because the safety of genetic engineering (and here I'm speaking particularly about genetically engineered crops) is based on a very important assumption which the human gene count has completely blown out of the water. That assumption is as follows: each gene is responsible for creating one and only one protein for an organism.

That assumption originally led to the prediction that the human genome would have about 100,000 genes because humans produce about 100,000 proteins. Well, the count has now been slashed to between 20,000 and 25,000. That means that a single gene can be responsible for making several different proteins under different conditions.

What does this say about the safety of genetically modified crops? The creators of such crops have told us that they are completely safe because the genes inserted in those crops will produce only one specific protein. That claim can no longer be made. The truth is the no one knows exactly what proteins might be produced by any gene inserted into a plant, and since no testing of GMO crops is required, no one is testing for this. These new genes may well produce toxins which have never been seen before. (In fact, there is strong evidence that just such a phenomenon occurred in the production of tryptophan, an amino acid supplement, which poisoned thousands in the United States and left many crippled. The production process used a genetically modified strain of bacteria. Subsequent testing revealed novel toxins that were extremely poisonous even at very tiny concentrations.)

Moreover, the methods by which genes are introduced into plant cells are imprecise. They are essentially shot into the cells with a gene gun in hopes that some of them will stick. In the process damage may be done to other parts of the plant's DNA and dormant DNA may be awakened to produce proteins not normally associated with the plant.

For an excellent and clear account of this and other problems related to the genetic engineering of crops, see Seeds of Deception by Jeffrey Smith.

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As some of you know, I'm working on a book on the fight over organic standards in the United States. I recently returned from Washington. D. C. where I attended a meeting of the National Organic Standards Board (NOSB), the board which decides what constitutes organic production and processing in the U. S. The board is filled with dedicated defenders of the organic label. But, the USDA, which has been charged with administering the program, is implacably hostile to organic farming. The USDA has for many years been captive to the chemical fertilizer and pesticide industries and now to the producers of genetically modified crops. All are an anathema to the organic movement. Two times now the USDA has tried to slip into the organic standards allowances that no one in the organic movement would ever allow.

When the first proposed organic rules came out in the late '90s, USDA higher-ups inserted allowances for GMO crops, sewage sludge as fertilizer and irradiation of food. A huge letter campaign and political pressure from congressional supporters of the organic community stripped those last-minute additions out of the regulations.

Earlier this year, I was witness to the same kind of move in an April NOSB meeting in Chicago. The USDA staff simply declared unilaterally without even consulting the board that fishmeal with artificial preservatives could be used for cattle feed, that antibiotics could be used on organic dairy cows, that pesticides containing unknown toxic ingredients could be sprayed on organic crops, and that all personal care products were now suddenly not covered under the program. It also said fish and seafood labelled organic were now in violation because no specific standards yet been laid out. (The organic fish and seafood industry had been relying on the livestock standards for guidance until specific standards for fish and seafood could be drafted.) The meeting was very rancorous and testy. You can read about the whole thing here.

Some of the damage was reversed by the time of the meeting I attended earlier this month. The offending directives were withdrawn and task forces were set up to deal with the issues. The National Organic Program (NOP) staff was reshuffled in the wake of the outcry and they were considerably more conciliatory and deferential to the board. A. J. Yates, the administrator who oversees the Agricultural Marketing Service which runs the NOP, walked into the proceedings unannounced. Everything stopped and he was allowed to make some remarks in which he emphasized his support for the organic program.

It's hard to tell whether this really represents a new attitude. Given the USDA's record, the situation warrants continued vigilance on the part of the organic community.

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Thursday, October 28, 2004

As promised I'm going to discuss how new nonconventional sources of oil, particularly oil sands (also known as tar sands, hence my headline) fit into the arguments about peak world oil production. To understand this, you must first understand the idea of "net energy." The simplest way to explain it is that it takes energy to get energy. In other words, some energy has to be expended in the form of drilling, pumping, refining and transporting oil, for instance, before its energy can be used. The same is true of any energy resource. It follows that if there is no net energy from an energy resource, it is pointless to extract and refine it since this leads to a net loss of energy or at best, no net gain. (An energy source, such as oil, may be valuable for other things such as plastics or petrochemicals and therefore still be worth extracting for these purposes even if there is no net energy gain.)

As you might expect the earliest discoveries of oil and coal were the easiest to get and thus yielded the highest net energy. Before 1940 the net energy for oil was greater than 100 to 1, that is 100 units of energy yielded for every 1 unit expended. Since then it's declined to around 20 to 1 for current production and 8 to 1 for new discoveries. The same is true of coal though the ratios differ.

When oil optimists point to the Canadian oil sands and say there is more oil there than in all of the Middle East, what they don't tell you is this. First, as I mentioned in Do high oil prices foreshadow a deeper crisis?, no resource can ever be economically extracted at 100 percent rates. It's not unusual for oil fields to yield only 30 to 40 percent of their total oil before it costs more to extract the oil than it's worth. There's every reason to believe that extraction rates for the oil sands will be no better.

Second, it takes a lot of energy to separate the oil film from the sand. Lots of hot water is involved. That takes a lot of energy. Third, the water has to come from somewhere and pumping it takes energy. (The oily waste water is pumped into vast lagoons for disposal, but that is another issue.) Fourth, and very important, the product produced up to this point isn't conventional oil. The residue left from this process has to have hydrogen added to it before it becomes suitable for use. Where does the hydrogen come from? Much of it comes from natural gas another finite resource the supply of which may very well be peaking in North America and may peak worldwide sometime before 2050.

The bottom line: It takes something like the equivalent of two barrels of oil in energy to make three barrels of conventional oil from oil sands. The technology will surely improve. But, it is unlikely to ever move from 1.5 to 1 to the 20 to 1 ratios we're getting from old production. And, as the cost of all conventional energy sources rises, so will the cost of extracting oil from oil sands.

This doesn't mean that oil from oil sands won't be useful. Many who say a peak in world oil production is imminent believe that such sources of oil will prevent an abrupt falloff of production on the other side of the peak. But, oil sands and other nonconventional sources of oil will probably not do anything to delay the peak if it is nearby, say, within the next 10 to 15 years.

The other day I mentioned the Living Planet Report 2004 put out by the WWF which details the decimation of species worldwide. If you haven't already done this, take the Ecological Footprint Quiz to find out what would happen if everyone in the world lived like you did. I took it several months ago at an Earth Day event. It's quite eye-opening.

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Wednesday, October 27, 2004

Late last week Japanese and American negotiators announced an agreement in principle to allow U. S. beef imports to Japan to resume. The imports had been banned since the discovery of mad cow disease in the United States last year. The AP story describing the agreement includes several items the significance of which may not be apparent to those who haven't been following this story.

One item stands out. Japan has had a 100 percent testing policy for all cattle slaughtered since 2001. The American negotiators are trying to get them to drop the testing requirement for cattle under 20 months of age, that is, those cattle that would be allowed in under the agreement. (It is thought that cattle don't develop the disease until after 20 months of age though this has been disputed.) Japanese negotiators say they are taking that proposal back to their superiors and recommending it. (By the way, I don't buy that the Japanese initiated this idea as stated in the article. It may be merely that the Japanese made a counterproposal after the Americans insisted. My evidence for this is that the Japanese are insisting that the Americans put in place a tracking system for individual animals so that their ages can be verified.)

Now, why is ending testing so important to the Americans?

The answer is obvious once you realize that until the mad cow scare last year, the USDA had been testing only about 20,000 cattle per year out of an estimated 35 million slaughtered. After the discovery of mad cow in the U. S., the USDA wanted to appear to take action. Among other things it announced that testing would immediately be doubled. Sounds good, but that means that instead of testing 1 in about 1750 cattle slaughtered, the USDA will now test 1 in 875 or about one-tenth of 1 percent.

By now, you probably know where I'm going. The USDA is scared to death that 100 percent testing by the Japanese will result in the discovery of mad cow in American beef imports and that that would send the U. S. beef industry reeling again. If cattle could talk, we would call the proposal to end testing "Don't ask, don't tell."

So, why are the Japanese caving on this? They haven't quite yet. We'll see what their higher-ups say.

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When some voters go to the polls next Tuesday, they will decide whether to ban the growing of genetically modified crops in their counties. Voters in four California counties--Butte, Humboldt, Marin and San Luis Obispo--could follow Mendocino County which banned them in March. For the time being the momentum seems to be on the side of the anti-GMO forces. At least seven more California counties are looking into putting such a ban on the March 2005 ballot.

A conversation I had at the Organic Trade Association show in Chicago in May revealed a key turning point in the successful campaign to ban GMOs in Mendocino. Katrina Frey (who along with her husband owns Frey Vineyards, the largest completely organic winery in the United States) acted as treasurer for the group spearheading the drive. She told me that no local residents would take the pro-GMO side for a public debate sponsored by her group. So the organizers invited scientists from UC-Davis to argue the case for GMO crops.

When one audience member asked the scientists what their views were about genetically modified crops that produce pharmaceuticals (sometimes called biopharm crops), all of the scientists agreed that such crops should only be grown indoors inside of triple-locked facilities to prevent genetic contamination of regular food crops. Television and newspaper reporters highlighted the exchange in their coverage of the event.

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It is altogether unheard of when a top government scientist criticizes a sitting president a week before a presidential election. But, that is what Dr. James Hansen, director of the NASA Goddard Institute for Space Studies, did in the The New York Times. He said that Bush's plan to put off for another decade cuts in emissions of greenhouse gases known to be responsible for global warming are a "colossal risk." Hansen must feel very strongly about those risks because he admits that he is probably putting his career on the line by speaking out.

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Tuesday, October 26, 2004

When the objective-sounding National Center for Food and Agriculture Policy says its "studies" find that GMO crops are lowering pesticide use and increasing the bottom line for farmers, there must be something to it, right? Read the Wisconsin State Journal article to the end to find out what farmers really think. As for the National Center for Food and Agriculture Policy, well, this is who they really represent.

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The WWF (formerly known as the World Wildlife Fund) has released its Living Planet Report 2004 which calculates that humans consume 20 percent more resources each year than the Earth can regenerate. This is resulting in a growing long-term deficit. In other words, we're eating the seed corn. The report is filled with easy-to-understand charts, maps and data. Especially striking is a map of the world's remaining wilderness versus area inhabited by humans. We have taken over nearly every corner of the plant. It's no wonder that the number of plant, marine and animal species is plummeting worldwide as the report amply documents.

My previous post on peak oil includes two significantly different timelines for the day when oil production will turn down forever. As one source said, we won't really know who is right until quite a ways after the peak. So what level of concern is appropriate given the great uncertainties surrounding this event?

Let me use the analogy of homeowners insurance. We pay for fire insurance as part of the whole package, but how many of us have actually experienced a house fire that led to an insurance claim? Very few, I would venture. So, why do we pay for it (other than because the bank holding the mortgage requires it)? The answer is because the consequences of a house fire can be so devastating. We take out insurance against rare events because of the severity of those events, not the likelihood of them.

I have found that many Americans do not understand this simple idea. Hence, the almost complete lack of concern about our energy future. But, even if peak oil doesn't occur for 50 years, it will still occur. The downside to getting ready now is that we'd have to forgo some current consumption to pay for a new energy system. In all likelihood that would mean moving away from hydrocarbon fuels that are creating global warming (and its possible severe outcomes). As a result we would have cleaner air, we would slow or halt global warming, we would create vast new employment in the alternative energy field, and we'd be all ready when the downturn in oil production came. We would probably hardly notice it when it arrived. AND THIS IS THE WORST THAT WOULD HAPPEN IF WE MADE THE ENERGY TRANSITION EARLY!

The upside to getting ready now is that peak oil production may be nearer than most people think and waiting any longer could result in huge economic, social and ecological disruptions, disruptions that we might well rate catastrophic in retrospect. Some observers say that failing to prepare might even spell the end of industrial civilization worldwide and lead to a cascade of events that would reduce human populations by 90 percent over the next century. Wouldn't it be prudent to take out some insurance against that, however unlikely such a scenario may seem to us now? And the insurance we'd be taking out wouldn't be like homeowners insurance--money lost forever unless we make a claim. Instead, this kind of insurance would be an investment that pays for itself over time in a better environment and a more sustainable, decentralized, and probably more peaceful world society. Why aren't we doing it?

[In subsequent posts, I will talk about nonconventional sources of oil and whether those sources could solve the challenges we face. I'll also talk about the economic argument that the marketplace will solve our energy problems because rising prices will lead 1) to greater supply and 2) to the substitution of other energy sources for oil.]

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Monday, October 25, 2004

Beneath the current chatter about rising oil prices a little known debate among geologists, economists and energy analysts is highlighting a startling question: Could world oil production be close to peaking, not just temporarily, but for all time?

If so, further dramatic price rises lie ahead--possibly within a year or two, but almost surely within the next decade according to some experts.

Not even these pessimists believe the world will run out of oil any time soon. The key issue is whether due to geological constraints the world is near or at its maximum production level. If this assumption proves correct, rising oil demand will collide with falling oil production and initiate an era of permanent shortages.

The consensus view among economists, geologists and energy analysts, however, is just the opposite. The consensus thinkers believe that large oil discoveries lay ahead and that new technology for finding and extracting oil will keep the world awash in petroleum for decades to come.

While predictions about peak world oil production have been around since the mid-1970s, the recent run-up in prices has sparked new interest in dissenting views about oil's future. A small, but growing group of oil geologists and academics has been expanding on the work of M. King Hubbert, a Shell Oil Company geophysicist. In 1956 Hubbert predicted that oil production in the continental United States would peak around 1970 and thereafter decline. He was widely ridiculed at the time, but he proved correct. Oil production from the lower 48 states continues to decline to this day.

Hubbert's basic idea was that because oil is a finite resource, its production rises in a bell-shaped curve, reaches a maximum, and thereafter begins a gradual decline. The pessimists have applied Hubbert's model to world oil production and come up with peaks that range from 2005 to 2020. With energy needs continuing to expand worldwide, especially in rapidly growing countries such as China and India, demand for petroleum is now rising swiftly. If world supplies were to shrink, something would have to give and that something would be price.

At current prices oil is still relatively cheap, according to Douglas Reynolds, associate professor of oil and energy economics at the University of Alaska-Fairbanks. It would have to reach $70 to $80 a barrel just to match its inflation-adjusted price during the last oil shock in 1979. When the peak does occur--something Reynolds expects between now and 2015--prices will likely reach between $150 to $300 a barrel.

The exact date for a peak is impossible to pin down because it depends on economic growth rates, recessions (which lower demand temporarily), imprecise oil resource estimates and possible additional large discoveries which might push back the peak.

"It'll be years before we can look back and say whether it happened," says David Goodstein, vice provost and professor of physics at the California Institute of Technology. But, "unlike the first shock in 1973, it won't be temporary," explains Goodstein who recently published "Out of Gas: The End of the Age of Oil."

For this reason, he counsels, "we ought to give ourselves the best head start we can." With bold political leadership and public resolve he believes the world could kick its fossil fuel habit within a decade or two. "If we're very fortunate, the worst (we'll experience) will be continuously rising prices, not panic," he says.

Matthew Simmons, chairman of Simmons & Company International, a Houston investment bank specializing in energy, says warning signs are already flashing. Some 70 percent of all current oil production comes from fields discovered over 30 years ago. Oil is now depleting at rates faster than new discoveries can replace it. Costs for finding new oil are rising as well. "The days of the easy stuff disappeared long ago," Simmons says.

Simmons is technically correct according to a report compiled by IHG Energy, a division of the global energy consulting firm IHG Group. But, he leaves out growth from additions to reserves, which expand as additional work is done on existing fields and technology makes more of the oil extractable. When both new discoveries and reserve additions are counted, the oil industry continues to replace all its depleted reserves, the IHG report says.

Peak oil theorists counter that peak oil production always follows peak discovery and that world oil discoveries peaked in the 1960s. Simmons disputes the notion that new technologies will expand the pool of recoverable oil by very much in the future. He says these technologies are already widely used and any effect they've had on reserves is in the past. Now, all those technologies act like extra straws in the same glass, drawing down oil resources more quickly without increasing their recoverable size.

Because oil deposits are never 100 percent recoverable for both economic and geological reasons, the effect of technology on recovery rates is critical to the debate. "Recovery factors could double using 'smart well' technology," according to Thomas Ahlbrandt, World Energy Project Chief at the U. S. Geological Survey (USGS). ("Smart well" is a generic term applied to a wide array of technologies used to enhance oil recovery.) Ahlbrandt led a team which evaluated world oil and gas resources in the late 1990s, an assessment that is continuing and expanding.

How much oil the world has left depends on how much it had to start with. Ahlbrandt's team believes the earth had an endowment of 3 trillion barrels of oil. (The team also came up with a low estimate of 2.2 trillion and a high estimate of 3.9 trillion.) The pessimists often put the earth's total oil resource near 2 trillion barrels.

The total amount of crude oil consumed through 2003 is about 900 billion barrels. The world consumed almost 29 billion barrels of oil last year and is set to consume more this year. The U. S. Energy Information Administration (EIA) expects demand to grow to more than 43 billion barrels a year by 2025.

While the USGS makes no formal projections about peak oil production, Ahlbrandt points to the work of EIA analysts who used the USGS numbers to construct 12 different scenarios for peak oil production ranging from 2021 to 2112. (The 2112 scenario assumes the highest estimate of oil resources and absolutely no world economic growth between now and then.) The most likely scenario calls for a peak in 2037. (Story continues below.)

The USGS survey did not include non-conventional sources such as tar sands which in Canada alone may hold more oil than Saudi Arabia. But, the difficulty of extracting the oil makes it much more costly to produce than conventional oil. Since so much energy is involved in the extraction process, the costs of extraction rise when energy prices go up.

Ahlbrandt says that extensive deposits of new oil are likely to be found in the Arctic, especially northeast Greenland, and offshore in the South Atlantic. He admits that in the case of Greenland significant technical hurdles would have to be overcome.

He also points out that 80 percent of all the oil wells ever drilled have been drilled in the United States. When Hubbert did his work on U. S. production, Ahlbrandt explains, he was dealing with a very mature set of oil fields about which much was known. He says compared to the United States the rest of the world has barely been explored, and this is part of why he believes many large deposits are yet to be discovered.

Still, the pessimists remain unconvinced and even alarmed by current indicators. "I don't buy that we haven't found the biggest fields yet," Reynolds says. After all, he adds, "if (a field) is that big, it's pretty darn easy to find. It's not like it's hiding behind the moon."

Beyond this Russia has said it is now pumping at full capacity. In addition, The New York Times reported earlier this year that advanced oil recovery techniques may not be delivering as promised, citing a precipitous drop in production from a major field in Oman even after the techniques were applied. Also in question, the Times reported in a separate story, is the ability of Saudi Arabia, the world's largest oil exporter, to produce more than it already does.

"If this is true, then we're at the peak," says Simmons.

Simmons has been seeking additional data from Saudi Aramco, the Saudi national oil company. But recent releases of information from the company haven't satisfied him that it can significantly increase production to supply the growing needs of the world.

Ahlbrandt, who previously worked as an oil company geologist in Saudi Arabia and who knows Saudi oil officials well, says he's comfortable with Saudi Aramco's reassurances and believes that Saudi Arabia has vast oil deposits yet to be developed.

Reynolds says that may not matter much for reasons that have nothing to do with geology or oil reserves. His work has shown that large state oil companies such as Saudi Aramco and Mexico's PEMEX tend to be risk averse. The governments that own them are more interested in having a consistent stream of profits to pay for various government expenditures than making heavy investments in exploration that might fail to produce results.

Reynolds now puts Russian oil companies in this category since the Russian government has made it clear that transferring ownership of Russian oil assets to foreigners won't be tolerated. He expects the Russian government to take tighter control of its domestic oil industry through taxation and backdoor moves at nationalization that might include taking control of a company for failure to pay taxes.

That means governments of the world's top two oil exporters and a third very important one may delay investment in oil exploration in order to fund more government spending, Reynolds says. Perversely, higher prices may make it even more likely that the state-controlled companies will do this. Saudi Arabia, Russia and Mexico may figure that bringing a lot more oil onto the market will only drive prices down, penalizing them for their investments.

Reynolds contends that this behavior among three big exporters will likely push the date of peak oil production forward. But, it will also make production declines on the other side of the peak less dramatic as the oil that has been held back is finally brought into production.

He added that even if the USGS numbers are too low and the world's total oil resource is twice the mean estimate--that is, 6 trillion barrels--this would only push the peak back by perhaps another 10 years, still not a lot of extra time to make a transition to alternate fuels.

Both sides of the debate agree that oil is not a limitless resource and that someday the world will have to wean itself from its oil habit. But, there's a lot riding on whether that day is close at hand or whether it lies comfortably in the future.

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